Hill Staff Report Shows That Rate Structure and Challenges in Tracking Customer Usage, Coupled with Rate Increases and Cold Weather, are Main Contributors to Soaring Bills

SACRAMENTO – State Senator Jerry Hill is calling on the Pacific Gas and Electric Co. and the California Public Utilities Commission to fix the utility company’s rate structure, which heightens the increase that many customers see in their bills during the coldest winter months. Hill also is recommending that PG&E and the CPUC review the effectiveness of efforts to help customers understand when their usage climbs, so they can adapt before their billing cycle ends.

The senator said his suggestions are based on his staff’s report, released today, that examined utility rates, usage, weather data and information from bills ratepayers shared with his office.

“The research showed that the most vulnerable are being hit the hardest at a time when they need heating the most,” said Senator Hill, D-San Mateo and Santa Clara Counties. “PG&E and the Public Utilities Commission need to prioritize customer heating needs in a way I have not yet seen.”

The report describes how PG&E’s tiered rate system exacerbates the increase in customers’ bills during the winter. Under the system, natural gas consumption is categorized into tiers. Each tier is capped at a certain amount of use. The lowest level of consumption is billed at the lowest rate, known as Tier 1. Consumption that exceeds the usage cap for Tier 1, is then billed at a higher rate. For example, Tier 2 gas consumption is billed at a rate that’s roughly 40 percent higher than Tier 1 use.

According to the report, the cap for Tier 1 gas usage during December and January, typically the coldest months of the year, is easy to exceed. In addition, the report found that the usage cap for Tier 1 is lower than the minimum set by state law, yet had been allowed by the CPUC. These factors not only led to soaring bills, but also to increases that were unnecessarily high, the report said.

The report also found:

The number and timing of recent rate hikes have further raised winter bills, as has increased energy usage.

January temperatures that were lower than a year ago are likely a cause of increased usage, but many bills examined even in more temperate months show that some customers are using more energy than would be expected. To figure out the reasons for this consumption, PG&E and customers need to look beyond the bills, possibly to the structure being heated and use habits.

PG&E customers pay high prices for energy without knowing why, including many on fixed incomes, who can’t afford unpredictably high and volatile bills.

The report noted that next winter’s bills could be even worse:

This winter’s natural gas wholesale prices are relatively low, but increases outside the state’s control could lead to further bill shocks next year.

PG&E proposes to soon increase the Tier 1 cap for electricity use during the summer and further reduce the Tier 1 cap for electricity use during the winter. This would ease the longstanding problem of high summer bills for customers in the Central Valley. But it would make the increase in winter bills sharper for customers throughout the state who rely on electricity to heat their homes.

For these reasons, the report makes the following recommendations to PG&E and the CPUC:

Increase the first tier usage allowance in the coldest months by changing the method by which it is calculated.

Modify PG&E’s proposal to lower summer electric bills in the Central Valley to prevent customers who use electric heating from having even higher heating bills next winter.

Consider how to better alert customers that their usage is climbing so that they can adapt their consumption usage in time to avoid shockingly high bills.

Consider evaluating the success of such alerts when calculating potential bonuses for utility executives.

Senator Hill also urged PG&E and the CPUC to work with customers, especially those on fixed income, to help them better understand their energy bills and analyze their usage, perhaps by conducting onsite energy audits.